Mex Group Worldwide Ltd v Duthie & Anor (No. 2: Costs) [2025] EWHC 1725 (KB)

Tom Poole KC and Katharine Bailey (instructed by Bellevue Law Limited) for the Defendants

Mr Justice Kerr :

• This is my further judgment on costs in this case about the use of confidential information by a solicitor, the first defendant (Mr Duthie) who is sued by his former client, the claimant (Mex) for breaches of his duties of confidence and wrongful retention of client documents. The second defendant (DCL) is a service company owned and controlled by Mr Duthie, through which he provided in house counsel services to Mex and its subsidiaries known as the MultiBank Group. Mex applied to strike out part or all of the defence and counterclaim and / or for summary judgment.

• I handed down my reserved judgment on 5 June 2025: see [2025] EWHC 1360 (KB). I dismissed the application, except that I granted Mex’s application for summary judgment on the claim for destruction or delivery up of documents and confidential information wrongfully retained. I adjourned the question of the claimant’s remedy for that wrongdoing until the end of the trial or further order. Mex accepts that the defendants were the mainly successful party, but the parties disagree about what orders in respect of costs are appropriate. They made written submissions on costs.

• The defendants seek their costs of the whole application on the standard basis, to be subject to detailed assessment if not agreed; save that, they submit, the costs of a hearing listed for 18 and 19 March 2025, adjourned at my initiative (the adjourned hearing), should be in the case. They seek a payment on account of £122,000^[1], i.e. 70 per cent of £174,000, the costs (excluding costs of the adjourned hearing) in their updated costs schedule. They do not accept any discount to reflect the success of the claim for wrongful retention of confidential information.

• Mex seeks its costs of the adjourned hearing on an indemnity basis, with a payment on account of £49,700. Mex says it should pay (on the standard basis) only 60 per cent of the defendants’ costs, other than of the adjourned hearing, the discount reflecting the defendants’ only partial not full success and the weakness of parts of their defences to the claim, on which I commented towards the end of the main judgment. Mex objects to a payment on account at the level sought objecting to some claimed items and suggesting 50 not 70 per cent. It suggests it should pay £40,500, with mutual set-off.

• The submissions of the defendants can be summarised as follows:

(1) There should be no percentage reduction in the defendants’ costs of the application. Mex’s success on the wrongful retention of property claim was a pyrrhic victory because no immediate order could be made on the strength of it without substantially depriving the defendants of the means to defend themselves. The claimant’s success was, in substance, complete as the court accepted there must be a trial which will include use of the documents wrongfully retained.

(2) A percentage reduction is always a crude measure and the exercise must be a “broad brush” one. It is in practice difficult to disentangle individual items of costs and attribute them to one or other issue in the case. If there were any percentage reduction it should be much less than 40 per cent. Mex has not attempted to quantify its own costs referable to the wrongful retention of property claim, either as individual items of cost or as a proportion of its costs of the application as a whole.

(3) Further, the wrongful retention of property claim was a distinct and straightforward issue which did not generate any significant costs over and above those attributable to the other issues, on which the defendants succeeded. It occupied two paragraphs of the particulars of claim and did not feature in the reply and defence to counterclaim. It was dealt with cursorily in Mex’s witness statements and skeleton argument and only briefly in the court’s judgment.

(4) The costs of the adjourned hearing should be in the case because of the circumstances of the adjournment. It was apparent from extensive correspondence produced to the court that the parties were very close to agreement apart from the issue of costs. The court adjourned of its own motion with a proposal that costs be separately adjudicated on the second day fixed (19 March 2025). The parties then sought to settle and the defendants negotiated in good faith.

(5) The defendants needed time to consider the position and make submissions on costs. They proposed an adjournment rather than costs being determined as a stand alone issue on 19 March. In the event, through no fault of either party, it became clear that the costs issue was so inextricably linked to the merits that it would not be possible to settle the main dispute without an examination of the merits. The settlement negotiations therefore failed but neither party is to blame for the court’s case management decision to adjourn of its own motion.

(6) Mex should be ordered to make an interim payment on account of the defendants’ costs of resisting the application. While Mex proposes only 50 per cent, and of a figure lower than that claimed in the defendants’ costs schedule, this is based on meritless objections to some of the items. The defendants have answered seriatim those concerns in their brief written submissions on costs. A reasonable proportion of the amount claimed would be 70 per cent, which is the percentage Mex successfully claimed when it obtained a costs order on a different, earlier issue.

• Mex’s arguments were set out in a letter of 4 June 2025 commenting on the then draft judgment and consequential matters, with a schedule stating concerns about the amount claimed in the defendants’ costs schedule. Those submissions were then amplified in written argument from counsel. I paraphrase them thus:

(1) As for the costs of the adjourned hearing, on 17 March 2025 the parties were close to settlement of the substantive issues and the defendants rejected an open offer to settle apart from costs, which could be adjudicated. The defendants then, Mex says, “deliberately and cynically frustrated there being an effective hearing on those dates by misleading [Mex] (as well as the Court, and possibly their own legal advisors) into spending Day 1 of that hearing negotiating on a false basis.”

(2) In response to my proposal that the second day be spent on costs, the defendants informed the court at 10.45am on the first day (18 March) that it would need more time and proposed an adjournment. That evening, the defendants performed what Mex calls a “remarkable volte-face“, saying that instead of costs being determined at a later date as a stand alone issue, “[o]ur client’s position has always been that they were only prepared to agree terms disposing of these proceedings on the basis that your client pays their costs”; and withdrawing the offer to settle.

(3) If that was really the defendants’ position the defendants should have informed the court that dealing with costs separately was not viable because they would not agree to settle the action unless Mex paid the defendants’ costs. Mex invites me to infer that the defendants’ ulterior purpose was “to prevent there being an effective hearing of [Mex]’s application on 18 and 19 March”; anticipating that “further material would become available from the Scottish Courts which the Defendants could introduce in a misguided attempt to generate prejudice against [Mex]”.

(4) Mex says the defendants’ conduct in relation to the adjourned hearing was extraordinary and worthy of censure; it takes the case out of the norm, warranting an order for indemnity costs. In addition to the conduct summarised above, the defendants did not appear at court at 10.30am on 19 March, when the court thought the negotiations were continuing. The matter was then listed for an appearance of both parties at 12 noon on 19 March, by which time an adjournment was inevitable because there was no longer enough time to argue the merits of the application.

(5) As for a reduction in the defendants’ costs of the application (the adjourned hearing apart), Mex relies on the success of the summary judgment application in relation to wrongful retention of property and on “bizarre arguments” not accepted by the court on other issues (in the context of the waiver, de miminis and duty to disclose issues), impelling the court to use the epithet “weak” and to say that Mex had “the better of the arguments” on those issues, albeit allowing them to proceed.

(6) As for the amount of any payment on account, Mex says the defendants’ overall costs figure (£174,000) includes impermissible items such as the voluntary particulars (£4,700) and the cost (£1,117.50) of preparing a note of a hearing before Freedman J in the WFO proceedings. Objection is taken on the basis of excessive solicitor time working on the defendants’ skeleton argument (£6,800); the cost of preparing the statement of costs (£4,032.50); “travel and waiting time” (£2,000); and hotel and travel (£368.03).

• I will deal first with the costs of the adjourned hearing, which both sides invited me to treat separately, in very different ways. I should start with a mea culpa, as I did when the parties appeared before me at 12 noon on 19 March 2025. As I said then, I am sorry that I made what turned out to be a wrong call since the settlement negotiations failed. In mitigation, I had reason to hope that adjourning to the second day would promote settlement not just of Mex’s application, but of the action as a whole.

• That seemed to me a prize worth pursuing. A trial of the action, should Mex’s application fail, would by all appearances be (as Mex submitted in strong terms) burdensome and expensive. An adjournment would also spare a much needed day of the court’s resources, rather than spend the day hearing argument I thought would soon become academic. It is correct that, costs apart, the parties were very close to agreement. As I said at the time in an email, the remaining differences were ones of drafting which, I thought, could be easily overcome.

• Next, I reject Mex’s extravagant contention that the defendants cynically misled the court and their own and Mex’s lawyers, to manufacture an adjournment on the second day, 19 March 2025. There are several reasons why I decline the invitation to draw that inference. First, it is unreal to suppose the defendants misled their own lawyers. They are not naïve people. Second, the defendants’ lawyers seem to me reasonable people doing nothing worse than fighting their clients’ cause with vim and vigour, as Mex’s legal team have also done, in this rather heated litigation. Their professional competence should not be lightly impugned; still less their integrity.

• Third, the defendants could not have been aware that the court would of its own motion adjourn the first day of the hearing. They had to react to that and decide quickly what positions to take in the settlement negotiations in which costs remained the real obstacle. Fourth, they are likely to have considered that they held the upper hand in negotiating a substantive settlement because the merits of the application were obviously weak (as time has proved) and because Mex was showing willing to settle the whole action, having already withdrawn from the fray in Scotland. The defendants therefore had good foundations for driving a hard bargain.

Continue reading this Judgment here.